Here’s what Modi government can learn from Odisha’s direct cash transfer scheme

Odisha has unveiled its own unconditional direct benefit transfer (DBT) scheme that will give all of its state farmers ₹20,000 a year.

The launch of KALIA preempts a likely budget announcement by Modi administration, which is planning a similar nationwide scheme.

The first phase of the programme will see transfers of ₹5,000 each to as many as 1.25 million beneficiaries.

The state government of Odisha unveiled its own direct benefit transfer (DBT) scheme that will give all of its state farmers-- without any sort of filter-- ₹20,000 a year. The announcement from chief minister Naveen Patnaik preempts a likely budget announcement by Modi administration, which is said to be planning a similar DBT scheme of its own in the run-up to national elections.

Handouts under the KALIA scheme, which stands for Krushak Assistance for Livelihood Income Augmentation, have commenced in
Ganjam, the home constituency of Naveen Patnaik - the chief minister of Odisha. Cash is being transferred electronically to eligible farmers through their bank accounts to enable investment in the rabi cropping season.

Around 92% of the state’s farmers - from sharecroppers to large-holding farmers - are eligible, according to the state government. While the scheme is unconditional, which means a beneficiary’s land holdings has no bearing on his/her eligibility, landless households will be given special privileges under the programme such as payments of ₹12,500 for poultry farming and goat rearing, for instance.

Electronic transfers would mean that only farmers with bank accounts -- or those with access to any other formal institutions -- will enjoy the benefit of the cash transfer scheme.

The proportion of households where at least one member was reported to have saved any money with a formal institution in the state of Odisha
was 71% in 2016-17, according to a survey by the National Bank for Agriculture and Rural Development (NABARD). The national average was 48% at the time.

The first phase of the programme will see transfers of ₹5,000 each to as many as 1.25 million beneficiaries. They will receive handouts twice a year - during the rabi and kharif seasons - in addition to a ₹10,000 payment upfront. They will also receive insurance support and access to interest-free loans.

In an SBI report, S K Ghosh, the bank’s chief economic advisor, also
recommended an unconditional transfer programme, at least in the short term. A majority of India’s rural population does not own land. Even for those who own land, many states have not digitised land records fully. All of this makes the categorisation of farmers based on the size of their land holdings extremely difficult.

And Odisha’s scheme is not the first. Telangana operates its Rythu Bandhu scheme, under which the state government provides smallholder farmers a handout of ₹4,000 per acre on an annual basis for investment in two crops.

However, KALIA stands out because it is unconditional and therefore, will reach more farmers and yield better results politically. If the Modi government does plan to unveil direct cash transfers at the national level on friday, he has two designs to choose from and one of them is more politically savvy than the other.

Overall, Odisha’s move is well-timed. State elections for Odisha happen alongside national elections. The incumbent government, which is led by the Biju Janata Dal, has criticised the BJP and Congress’s promises for loan waivers in the state.

By kicking off direct cash transfers, Patnaik has not only given himself a head start, he has also stolen at least part of the thunder that from his political rivals.